How Savings Plans Can Save You in Emergencies?

Emergencies can occur in any person’s life at any stage. Hence, everyone should be prepared to handle these challenging situations. This blog discusses how individuals can use Savings Plans to build strong financial security for such times. 

Investment in the right Savings Plans builds a financial cushion that protects you against financial setbacks from any emergency, such as job loss, major medical treatment, expensive home repairs, or any unavoidable expenses.

The Role of Savings Plans in Financial Security

What Constitutes an Emergency Fund?

An emergency fund creation should be treated like a non-negotiable aspect of your financial planning journey. This dedicated reserve of money should be set aside to cover unexpected financial situations that demand immediate attention.

Financial experts generally recommend maintaining an emergency fund equivalent to six months of living expenses, but you can save more for enhanced safety and stability. This fund can reduce financial stress during emergencies by providing instant liquidity to meet essential expenses.

Savings Plans as a Safety Net

Savings Plans help build emergency savings that can be accessed when emergencies arise. Since Savings Plans encourage disciplined and systematic contributions, you enjoy capital preservation and consistent growth through interest earnings or investment returns.

Many Savings Plans provide flexible withdrawal options or liquidity provisions so you can access funds when needed. This instant accessibility of funds creates a financial safety net that ensures peace of mind and prevents you from resorting to high-interest loans to manage emergencies.

Some options, like the Shriram Life Premier Assured Benefit Plan (UIN: 128N094V04), also help you enjoy financial stability during emergencies by creating an additional income stream in the form of annual earnings. The plan provides multiple pay-out options so policyholders can effortlessly navigate economic challenges at every life stage.

Types of Savings Plans for Emergencies

High-Yield Savings Accounts

These specialised bank accounts provide comparatively higher interest rates than traditional savings accounts. High-yield savings accounts are ideal for building and maintaining emergency funds as they combine easy access to funds with the benefit of earning competitive returns on idle cash.

These accounts are perfect if you have a low-risk profile and want to prioritise building liquid assets to handle financial emergencies effortlessly.

Money Market Accounts

People with moderate risk profiles may explore money market accounts as they have the potential to generate higher returns on initial savings or investments. You can explore options, such as treasury bills, certificates of deposits, commercial papers, or other short-term yet highly liquid financial instruments.

The biggest benefit of using these accounts for building an emergency fund is the potential to create a substantial emergency reserve with the same amount of money, translating to more money for emergencies. If you prioritise wealth creation, complement your money market account purchases with market-linked Investment Plans or Retirement Plans.

Short-Term Fixed Deposits

Short-term fixed deposits are another low-risk option that provides capital protection and steady growth to prepare you for emergencies. Unlike traditional fixed deposits, these deposits range from seven days to twelve months. 

Since deposit holders have the facility to withdraw funds prematurely, this quick access savings amount can be used to tackle any emergency. 

Advantages of Using Savings Plans for Emergencies

Immediate Accessibility

Financial emergencies demand quick action, so you must always invest in Savings Plans that provide immediate fund accessibility. Instant access to funds during emergencies ensures that the tough situation gets contained at the earliest, preventing further financial damage. 

You can choose Savings Plans like the Shriram Life Assured Income Plan (UIN: 128N053V05), as it provides a regular income option after a particular period. This steady stream of additional income can be used to handle financial challenges during emergencies. 

Maintaining Financial Stability

Savings Plans provide a ready pool of funds during emergencies that can be instantly accessed to meet expenses without compromising one’s economic well-being. These funds ensure you continue managing your lifestyle and tackle the emergency using the saved funds without any hassle or stress.   

Maximising the Efficiency of Emergency Savings

Regular Contributions

Consistent contributions to Savings Plans are essential for building dependable emergency savings. Regular contributions ensure your emergency fund grows steadily over time, keeping pace with the rising inflationary prices and potential future emergencies. 

Diversifying Emergency Savings

While most Savings Plans are low-risk, people should not rely on only one type of plan. Diversifying your savings across different plans will give you multiple benefits, such as security, growth, and accessibility. 

It is the easiest way to reduce the risk of capital erosion due to inflation, ensuring your funds are not overly exposed to market fluctuations. For example, you may invest a portion of your funds in high-yield savings accounts for security and the balance in Savings Plans like Shriram Life Early Cash Plan (UIN: 128N093V02) for higher return potential to build a sizable emergency fund. 

You can explore other diversification options, such as Childs Plans or Protection Plans with built-in savings features for steady wealth accumulation.   

Conclusion

Investing in Savings Plans is the easiest and least risky way to build a safety net for financially challenging times. These disciplined and structured savings help create an emergency reserve that can be used to instantly access funds during emergencies. 

Shriram Life Insurance, one of India’s leading insurance providers, provides a wide range of Savings Plans that can help you create emergency funds and achieve other financial goals. We also provide a wide range of Child Plans, Investment Plans, Retirement Plans, etc., to support diverse financial aspirations.